Finance, Credit, News | September 4, 2012

New Debt Refinance Program – Is It Good Enough for Small Businesses?

The economy is still in constraint and the CPA firms are supposed to go through a flat season throughout 2012. There aren’t going to be any positive or negative outlook for the majority of the firms, as per reports. But, the question is what after this? What about the debts that these small businesses may have incurred till now. Paying off the debts incurred is perhaps the toughest part for one and all – may it be a person or a small business. However, the only good news for the small business owners is that the SBA 504 debt refinance rules have been revised, thereby making the refinance process easier for the businesses and the firms.

Refinance help for small business owners

The small business owners in majority have been hollering for help from the times of financial crisis. Now, it seems that the help is at your door, if you too are a small business owner. The Small Business Administration or the SBA of the US has introduced a new financing tool through the Certified Development Company or the CDC partners. This has been done so as to help the small businesses refinance the existing debts. These are supposed to be the ones that have high interest rates which might have been used mainly for the purpose of purchasing a place for business purpose.

The refinance opportunities may help the businesses change the high interest balloon debts to be changed to the low interest ones. This program is also supposed to allow the borrowers use the equity in the building for all forms of eligible business expenses. These expenses can be the likes of the working capital used for the inventory, the business equipments, for the building repairs, the other eligible business expenses and also the payrolls.

Moreover, navigating the SBA 504 Debt Refinance Loan is easy. Like, in case of a debt on an existent building that is an owner-occupied one (if 51% of the building occupancy by the company meets the eligibility), you can have the option to replace it with a 20 year SBA 504 Debt Refinance Loan. This is supposed to get authorized by the SBA and also funded through the MWSBF. This loan is supposed to again, constitute of 40 percent of the total amount which have been borrowed. The other 50 percent of the loan is supposed to come from a different financial institution, which is going to assume a first position with regards to the collateral. On the other hand, the SBA and the MWSBF is going to get the second mortgage position. The interest rate of this loan is going to get negotiated within a term range of 10 to that of 20 years. The other 10 percent of the loan is supposed to be left out, as the equity from the building.

According to the Walt Carbonell, the president of USTC, which at present has only 32 employs, “The SBA-504 refinance program came at the right time,” and he also said that “We were facing a significant balloon payment with our old loan. The refi offered a fixed rate over 20 years. It gives us more financial flexibility and allows us to allocate more dollars to initiative that will help the company grow and create new jobs.”

This new form of refinance has also been able to extend help to the US Technical Ceramics or the USTC – the manufacturer of structural ceramics. It was able to close down a loan on a recent basis using the SBA refinance program. They were able to take the benefit from a low interest rate loan while using the SBA 504 loan. With this refinancing program, it is now saving almost around $68,000 every month. In order to make its mark in the market, it may now have the opportunity to use this money for other extensive purposes; so as to gain competition in the market.